Employer pays $450K to settle rounding, rest break claims

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Dive Brief:

Hi-Tech Pharmaceuticals, a Georgia-based herbal product manufacturer and distributor, has agreed to pay $454,655 in back wages to settle claims that it violated the overtime and recordkeeping provisions of the Fair Labor Standards Act (FLSA). The settlement affects 28 employees.

Investigators from the U.S. Department of Labor's (DOL) Wage and Hour Division determined that the company unlawfully deducted time from workers' timecards when they took short rest breaks, and rounded workers' time beyond what the FLSA allows.

The company also failed to pay workers overtime when they worked more than 40 hours in a workweek and failed to keep proper time and payroll records, DOL said in a press release announcing the agreement.

Dive Insight:

DOL notes in its regulations that short rest breaks of about five to 20 minutes are common in many industries. "They promote the efficiency of the employee and are customarily paid for as working time. They must be counted as hours worked," the rules state. "Compensable time of rest periods may not be offset against other working time such as compensable waiting time or on-call time."

On the other hand, bona fide meal periods, which typically last at least 30 minutes, according to DOL, serve a different purpose than coffee or snack breaks; therefore, they are not work time and are not compensable.

If an employee's breaks go beyond what an employer has deemed reasonable, the employer can address the issue through disciplinary measures, but should stop short of pay deductions, experts have said.

Similarly, employers need to ensure that any time rounding complies with the FLSA. The law allows an employer to round employee time to the nearest quarter hour, according to DOL. "However, an employer may violate the FLSA minimum wage and overtime pay requirements if the employer always rounds down," the agency said. In other words, employee time from one to seven minutes may be rounded down, but employee time from eight to 14 minutes must then be rounded up.

And when it comes to recordkeeping, DOL requires accuracy and completeness. During the Obama administration, the agency said in a guidance that employers need not record employees' exact start and stop times — only the employees' total hours worked. However, experts warned that such a practice could lead to trouble as it could ultimately be deemed inaccurate or incomplete.